Sequoia breaks Silicon Valley taboo by backing Anthropic alongside rivals

Sequoia Capital, one of Silicon Valley's most influential investment firms, is preparing to back Anthropic, the artificial intelligence startup behind the Claude chatbot, in what sources say is a blockbuster $25 billion funding round. The move breaks with a long-standing venture capital practice of avoiding investments in competing companies within the same sector.

The funding round values Anthropic at approximately $350 billion, more than double its valuation from just four months ago. The round is being led by Singapore's sovereign wealth fund GIC and investment firm Coatue, each contributing $1.5 billion. Microsoft and Nvidia have separately committed up to $15 billion combined, with other investors expected to contribute an additional $10 billion or more.

Sequoia's involvement stands out because the firm already has major stakes in rival AI companies. The venture capital giant is an early backer of OpenAI and has also invested in Elon Musk's xAI. By now adding Anthropic to its portfolio, Sequoia is challenging a fundamental rule that has governed venture capital for decades.

Background

For most of modern venture capital history, top-tier firms have steered clear of backing direct competitors. The reasoning was straightforward: investing in multiple rivals in the same sector created conflicts of interest and raised questions about information sharing. Venture capital firms typically wanted to place their bets on a single winner and help that company dominate its market.

Sequoia Capital itself demonstrated this approach in 2020 when it withdrew from a major investment in the payment startup Finix after determining that the company competed with Stripe, another Sequoia portfolio company. The firm walked away from tens of millions of dollars rather than back both companies.

But the artificial intelligence sector appears to be changing these long-held assumptions. The sheer scale of the AI market and the rapid pace of development have led investors to believe that multiple companies can achieve massive success simultaneously. Rather than a winner-take-all scenario, the thinking goes, there is room for several dominant AI platforms.

Anthropicwas founded in 2021 by Dario and Daniela Amodei, who previously worked at OpenAI. The company has positioned itself as a responsible AI alternative, emphasizing safety and ethical development. It now serves more than 300,000 business customers, with a growing number of large enterprise accounts.

Key Details

Leadership changes at Sequoia

Sequoia's decision to invest in Anthropic coincides with significant leadership changes at the firm. Last fall, Roelof Botha, who had previously served as a steward at Sequoia and was known for skepticism about inflated valuations, was removed from his leadership role. Pat Grady and Alfred Lin have since taken over as co-leaders of the firm.

Lin has publicly expressed enthusiasm for backing ambitious AI ventures. In 2023, when Sam Altman, the CEO of OpenAI, was briefly ousted from his company, Lin said he would eagerly back Altman's next major project. Sequoia's long relationship with Altman dates back years, including early backing for his startup Loopt and his role in introducing the firm to Stripe, which became one of Sequoia's most valuable investments.

The funding round details

Anthropic is seeking to raise $25 billion or more in this round, though earlier reports suggested the company was targeting $10 billion. The higher figure would make this one of the largest private capital raises in technology history. The funding is intended to support rapid expansion and cover the escalating computing costs required to develop and operate advanced AI models.

The company is reportedly preparing for an initial public offering that could come as soon as 2026. Anthropic has projected annual revenue between $20 billion and $26 billion for 2026, reflecting significant growth as it shifts toward developer tools and enterprise workflows.

"Venture capital powerhouse Sequoia Capital is preparing to invest in Anthropic, the AI startup best known for its Claude family of large language models, in one of the largest private funding rounds in tech this year."

What This Means

Sequoia's decision to back Anthropic alongside its existing investments in OpenAI and xAI represents a fundamental shift in how major venture capital firms approach the AI sector. The move suggests that investors now view the artificial intelligence market as expansive enough to support multiple winners rather than requiring firms to choose a single champion.

This shift has practical implications for the broader AI industry. It signals confidence that competition between multiple AI platforms will drive innovation and that all of the leading companies can achieve enormous valuations and market positions. For Anthropic specifically, Sequoia's backing provides validation and access to the firm's extensive network of connections and expertise.

The investment also reflects broader changes in how capital flows in the technology sector. Rather than concentrating resources behind a single company, investors are increasingly hedging their bets across multiple platforms in fast-moving markets. This approach reduces risk while maximizing exposure to the sector's growth potential.

For other venture capital firms watching these developments, Sequoia's move may encourage a reconsideration of their own strategies. The traditional approach of backing one winner per sector may give way to a more diversified model, particularly in markets where multiple companies can achieve scale and profitability simultaneously.